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The World Bank has urged Pakistan to strengthen its limited trade agreements, let the exchange rate move freely and push long delayed structural reforms to lower energy and production costs. In a new policy note, the bank said Pakistan has not followed the export led growth model adopted by successful economies, with exports falling from 16 percent of GDP in the 1990s to about 10 percent in 2024. It said the export base remains narrow and dominated by low value textiles and agriculture, while economic cycles continue to rely on debt and remittance driven consumption.
The bank called for a market driven exchange rate supported by tariff reforms, warning that tightly managed currency regimes trigger reserve pressure and repeated balance of payment crises. It advised the government to allow a deep interbank market without frequent State Bank intervention, increase participation from exporters and investors, and publish detailed market data to improve transparency.
According to the report, Pakistan’s weak export performance stems from high input costs, heavy regulations, expensive energy and protectionist policies that keep firms focused on domestic markets. Inefficiencies in customs, logistics and state owned enterprises, along with limited access to finance, have further hurt competitiveness. The bank estimated nearly sixty billion dollars in missing exports due to these long standing constraints.
It recommended expanding and deepening preferential trade agreements, noting that most of Pakistan’s ten deals remain shallow and underutilised compared to peer economies. The bank urged the government to upgrade agreements to include services, investment and digital trade, strengthen trade negotiation capacity and explore opportunities in Africa and Latin America. It added that tariff reforms must be paired with a flexible exchange rate, effective EXIM Bank operations and wider structural changes to support export growth.
